A pool of top-flight residential mortgages, about 740, is securing the Flagstar Mortgage Trust 2021-7 transaction, a deal that will issue about $661 million in residential mortgage-backed securities (RMBS).
The underlying properties are a mix of one- to four-family residential homes and condominiums, according to Fitch Ratings, are generally non-agency jumbo and agency eligible mortgage loans. Flagstar Bank, the originator, sponsor and servicer, originated the loans through its network of retail, broker and correspondent channels.
The mortgages are largely 30-year, fixed-rate loans that are current, and fully amortizing. Typically, the borrowers have strong credit profiles, low leverage and large liquid reserves. On a weighted average basis, the loans in the collateral pool have an original LTV was 65.1%, seasoning of about two months, and a FICO score of about 771, according to both Fitch and DBRS Morningstar.
As of August 1, 2021, the cutoff date, none of the loans had been subject to a coronavirus-related forbearance plan, DBRS said.
Similar to previous deals, the loans in the Flagstar 2021-7 deal were underwritten on the Ability to Repay rules, and also qualify as safe-harbor or temporary qualified mortgages, according to Fitch. About 9.4% of the pool is eligible for purchase by Freddie Mac or Fannie Mae.
Morgan Stanley is lead underwriter on the transaction, which is expected to close on August 24. The structure operates under a senior-subordinate, cash flow model, and DBRS notes that the Flagstar 2021-7 deal employs a locked-out class and senior enhancement floor to address tail risk and retail credit support.
In terms of geographic distribution of the underlying loans, California accounts for the largest concentration, with 42.7%, while San Francisco represents the largest MSA, 12.9%.
Fitch and DBRS expect to give ‘AAA’ ratings to most of the classes of notes, including about six notional tranches. The four senior most classes have a credit enhancement level of 15%, both agencies said. They also expect to assign ‘AA’ and ‘A’ ratings to more junior classes, including notional tranches, and ‘BBB’ to ‘C’ ratings to the subordinate classes.
All of the notes have a legal final maturity date of August 2051.
